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Monday, 8 October 2018

Celebrating Five years of the Office of the Tax Ombud

The Office of the Tax Ombud was created on
1 October 2013 and celebrates its fifth anniversary in October this year. The
office was created to deal with taxpayers’ complaints which could not be
resolved by taxpayers using the South African Revenue Service’s internal
complaints processes.

The Office has a degree of independence as
it reports to the Minister of Finance and can appoint its own staff without
having to consult SARS. In addition, the office is funded by a budget approved
by the Minister and not SARS.

Before taxpayers can lodge a complaint with
the Ombud they must exhaust SARS internal complaints procedures unless
compelling circumstances exist. To determine if compelling circumstances exist,
it must be established if the complaint raises systemic issues or exhausting
SARS complaint procedures will cause undue hardship to the taxpayer or is
unlikely to produce a result within a period of time the Ombud considers
reasonable.

The question that must be addressed is what
constitutes a systemic issue. During August 2018 the Ombud published a list of
twenty items that constitutes systemic issues. If a taxpayer encounters a
systemic issue they do not need to exhaust SARS internal mechanisms first
before filing a complaint with the Ombud.

The systemic issues are the following:

·Delay in refunds in certain
specific cases – the Ombud deals with twelve categories in this regard:

oFailure to link submitted
documentation requested by SARS to the main file

oThe unwarranted placing of
Special Stoppers

oUsing the filing of new returns
as an excuse to block refunds;

oDelay in the lifting of
stoppers and lack of a timeframe for doing so

oRefunds for one period being
withheld while an audit/verification is in progress on another period

oUsing historic returns to delay
the payment of refunds

oRaising assessments to clear
unallocated credits

oRequesting further information
during an audit

oAssessments successfully, but
refund still not paid out

oRaising assessments
prematurely;

oDebt set-off not withstanding a
request for suspension of payment

oVerification assigned to the
auditor but not finalised within the prescribed timeframe

·Incorrect allocation by SARS of
payments made by taxpayers

·Taxpayers being affected by
employer’s non-compliance with legislation relating to IRP5s

·Inconsistency by SARS in
providing taxpayers with timelines for finalisation of audits/verifications

·Victims of identity theft being
held liable for tax debts

·Non-adherence by SARS to
dispute resolution turnaround times

·SARS’s failure to take
information at its disposal into account, specifically relating to information
requested during audit/verification and objection procedures

·SARS taking collection steps
when legally barred from doing so

·SARS’s failure to take
information at its disposal into account, specifically relating to the tax
compliance system and the “pin” on the client’s profile indication tax
compliance status (TCS)

·Non-adherence to legislative
requirements in respect of final demand and third party appointment in terms of
section 179 (5) of the Tax Administration Act

·Numerous follow-ups by
taxpayers without being advised of the escalation process (unless the taxpayer
was represented by a tax professional)

·Pay-As-You-Earn Statement of
Account issues relating to, inter alia, the reconciliation of the account
specifically when recovering a debt

·Numerous follow-ups relating to
situations where SARS issues duplicate income tax numbers under one identity
number (unless the taxpayer was represented by a tax professional)

·SARS incorrectly invalidating
the notice of appeal

·SARS revising an assessment
without issuing any prior communication

·SARS revising an assessment
without issuing a letter of findings

·Refunds paid into wrong bank
accounts

·E-filing profile hijacking

·Delay in e-filing profile
transfer between tax practitioners due to as system error

·Dispute resolution
e-filing/system issues

It is anticipated that taxpayer complaints
will get to the Ombud quicker than before as, if the complaint is systemic in
nature, taxpayers do not need to adhere to SARS internal complaint mechanisms.

The Ombud has become an important means of
redress for taxpayers who have encountered problems in their dealings with
SARS. It is hoped that in time the independence of the office will be enhanced
and greater powers conferred on the office as is the case in other countries.

Areas in which the Tax Ombud should have more power are:

·In the United States, the
Taxpayer Advocate, an office similar to the Tax Ombud, can issue Taxpayer
assistance orders directing the Internal Revenue Service to refrain from taking
action against taxpayers in certain well-defined cases. It is unfortunate that,
in South Africa, the Tax Ombud does not, at this stage, have a similar power.

·Another problem that still
needs to be addressed is the issue of legal assistance for indigent taxpayers.
In the United States, taxpayers can go to Low Income Taxpayer Clinics for
assistance with their tax affairs. It is hoped that, in time, something similar
will be introduced in South Africa.

·The Ombud does not have the
power to award wasted costs to taxpayers as is the case in some jurisdictions
and hopefully in time this will be considered.

The SARS Service Charter has been published
and this should assist the Ombud in evaluating how SARS is meeting the
timeframes specified therein.

The Tax
Ombud must be commended for the work done by the office since 2013 in educating
taxpayers about taxpayers’ rights and addressing the administrative complaints
in the tax arena. Hopefully, government will accept the recommendations of the
Davis Tax Committee on Tax Administration and formally legislate the proposed
Taxpayer Bill of Rights to further entrench taxpayers’ rights in South Africa.

Congratulations
to the Office of the Tax Ombud and its staff on reaching its fifth anniversary
and wishing the office every success in its endeavours in the future in
addressing taxpayers’ administrative complaints and teaching taxpayers about
the rights they have when interacting with SARS.

Dr Beric Croome is a Tax Executive at ENSafrica. This article first appeared in Business Day, Business Law and Tax Review, October 2018.